Monday, July 18, 2016

Currency Matters!

Reporting on my road trip to Croatia is taking an age – nearly as long as the trip itself - because I’m trying to catalogue individual photos and sort out various bits of admin at the same time. Hopefully things will go a little quicker once I “get to” Croatia and into my stride but I don’t want to rush it as, this time, I kept to my resolution to note everything very carefully so I could give a reasonably accurate account of distances, costs and other hopefully useful information.

Today I tried to work out what exchange rate I was getting with my various sources of cash and credit card and it is a minefield. Nor might it be terribly relevant to readers at the moment as, since I came back, there has of course been a vote to leave the EU and a corresponding weakening of sterling exchange rates.

On the assumption that sterling will recover and get back to “normal” soon, here’s what I found. Firstly, it is very difficult to come to any firm conclusion about the various methods of obtaining Euros and kunas because there are so many permutations of fees and exchange rates. On top of that the “pure” exchange rate does of course vary from day to day, making it difficult to isolate variations between banks and other travel money providers. Secondly it’s not just about the pure financial cost – there’s convenience too. Cash often carries with it a better exchange rate if you change it abroad but you don’t necessarily want to be carrying large quantities of cash around with you. If like me you also have an aversion to queuing in banks (and tying the dog up outside) when you can simply use an ATM, then that convenience also has a value. So I took a bit of cash, had some Euros and kunas from a previous trip, used two different UK credit cards where necessary but majored on my Post Office Travel Money Card (denominated in Euros) until that ran out of the money I had loaded onto it.

The big advantage to me of something like the Post Office Travel Money Card (and of course many other similar products are available!) is that, if you think sterling is going to weaken, and/or if you want to save up steadily for your holiday, you can load it up in advance, either when you think the exchange rate is favourable, or when you have some spare cash. Of course the exchange rate might go the wrong way so beware. A couple of things to note with this card – when in a country with a currency different from your base currency, eg kunas, you get the option to accept the exchange rate offered at the time of the transaction (in which case your card is billed in its base currency) or let your card provider do the conversion with an (unknown) exchange rate, and a bigger fee, available at another time. I did not understand this properly to start with (and as you will see below it’s really just a gamble!) but, overall and despite an additional €7 in fees (€9.98 instead of €2) it was better for me to use my provider’s exchange rate (though this might have been due to the timing). I think the concept is explained somewhere quite prominently but I’m afraid it did not seem very clear when faced with the rather complicated decision on currency rates presented on the ATM screen at the time of the transaction. The screen and your slip make it very clear that you have no comeback if you accept the offered rate and then find out it is a rip off although they do not put it quite like that! Essentially you are choosing between a known exchange rate now and an unknown one later so it’s a bit of a shot in the dark. The other problem I had, and again this might be my fault, was that the card did not seem to work in petrol stations where payment was automated and there are quite few of these in, for example, Belgium. There are also a couple of frustrations:

a) you print your own statements and only a year’s worth of transactions are available so if you don’t realise this straight away…..

b) the date on the statement is not the transaction date (my banks give me a transaction date and a “received by us” date) so it’s quite hard matching individual transactions if you’ve done a couple of similar ones in the same place

In general I suppose the purely financial rules are to try and buy kunas direct (rather than going though an intermediary Euro card), and use the Euro card just for credit transactions to avoid too many fees, but it’s a bit more complicated than that. In the end you could tie yourself up in knots trying to save a few pounds and get the exchange rate movement completely wrong and lose much more!

The Croatian kuna is linked to the Euro in terms of exchange rates. I understand that we Brits (and Aussies, Canadians, Americans, etc) are in the “non Eurozone” minority of visitors to Croatia. However I find it quite infuriating that Croatian prices (for things like accommodation, car hire, campsites, etc) are often quoted in Euros but you have to pay in kunas and no one seems to be able to tell you what exchange rate will be used for conversion. Most organisations will quote prices in kunas too, if you persist, but I had a completely bonkers conversation with the receptionist of one very swish campsite who was adamant that they ONLY quoted prices in Euros (and this was the type of campsite that thinks all foreigners automatically come from Germany/or speak German as a native language). After remonstrating that Euros were not very relevant to me as a Brit, or them as a Croatian organisation, I got nowhere. “Fine”, I said, “then I’ll pay in Euros.” “You can’t” I was told, “it’s not legal; you have to pay in kunas” to which I replied, reasonably I thought, “then can you tell me how much I will have to pay in kunas, when I check out tomorrow?” “No”, was the response, “we only quote in Euros and I don’t know what the exchange rate will be tomorrow. The system will generate the kuna price in the morning”.

During the seven weeks I was away the publicised kuna exchange rate varied between about 9.4 and 9.8 kunas to the pound and the Euro between 1.26 and 1.29 Euros to the pound. I bought my Euros for my travel card back in March at 1.242 expecting the exchange rate to go against me in the future. However…taking into account fees, the best net exchange rate I got for cash was 9 and the worst was 8.2 so I’m going to have to work out a different strategy next time! For credit card transactions the kuna rate was nearer 9.3.

Rather than go by my limited experience of a prepaid travel money card, here’s a link to what Martin Lewis says about them and its reassuring to see that he’s also heard of them being refused at petrol stations (and for car hire which suggest that the problem is they have a relatively low finite limit on them).

For the purposes of reporting on costs I’m going to keep it simple and use €1.2 per pound and 9 kunas per pound which will take into account a little of the decline of the pound since the Brexit decision, though I’ll also give the base currency amount and you can work it out for yourselves at your prevailing exchange rate.

And for those readers who may have glazed over by now, don’t worry, the next posting will hopefully be a little more exciting!